CARRIERS WANT ETHERNET, BUT NOT AT ANY PRICE

As carriers look for ways to deliver greater value to their shareholders and keep the Wall Street vultures at bay, they are casting their gaze more than ever in the direction of reducing operating expenditures. If the buzz at Supercomm 2002 was any indication, Ethernet is seen by many as a tremendous vehicle to deliver the opex savings carriers seek.

But Ethernet has limitations that will have to be addressed by technology developers if it is to one day penetrate a carrier market that has billions of dollars invested in legacy equipment.

When it comes to network equipment, reducing opex for carriers generally follows one of two paths: new technologies that are cheaper to operate, or those that allow them to make better use of their existing assets. Sometimes it's both, said Lonnie Wheeler, founder and CEO of metro optical transport solutions provider White Rock Networks.

“You can't enter the market unless your technology is disruptive and you can deliver economics that are 30% better than what's out there today,” said Wheeler, who spoke at Supercomm's Telecom Investor Forum. “You have to be cost disruptive.”

Undeniably, Ethernet is cost disruptive. Because it is a far less expensive means to transport traffic compared with Sonet, it has been thoroughly embraced by long-distance providers and enterprises in North America, as well as carriers in Europe and the Asia-Pacific region.

“Sonet is entrenched, but Ethernet is a rising star,” said Ron Westfall, an analyst with Gartner Dataquest.

The entrenchment of Sonet, however, is the problem. Considering the amount of money carriers have invested in their Sonet and ATM legacy networks — and the fact they are still paying off those investments — carriers aren't going to execute a wholesale technology changeover any time soon. “In the U.S., you have 100 years of legacy equipment to deal with,” said Myron Gregorek, a senior product manager for voice and data network solutions provider Avaya. “That's going to slow the migration.”

For that reason, much of the talk at Supercomm centered on solutions that would allow carriers to overlay Ethernet technologies upon their legacy networks as a transitional step. But that approach doesn't address fundamental performance shortcomings that will have to be overcome for carriers to seriously consider Ethernet, said Steve McCaffrey, vice president of sales for optical-access provider Native Networks.

“Ethernet has always been known as a cost-effective solution, but it doesn't scale to a carrier-class product offering,” McCaffrey said. “Because scaling Ethernet is difficult, carriers will have to keep their legacy [synchronous digital hierarchy] technologies.”

There also are quality-of-service issues associated with Ethernet. Sonet networks employ a ring configuration, and placing Ethernet switches on the ring only causes congestion, said Nigel Cole, vice president of business development for metro-optical transport vendor Corrigent Systems.

“It wasn't designed to work with Sonet. Carriers need sub-50 millisecond restoration, and Ethernet doesn't provide that,” Cole said. “It falls short of five-nines reliability. Ethernet just doesn't cut it for serious carriers.”

But the pressure to drive down costs will eventually force carriers to make the transition to Ethernet, particularly as they work to penetrate the enterprise market, where the technology is fairly ubiquitous. “Cost per bit has to be driven down, so we'll see some of the technologies used in the enterprise gravitate to the metro and long-haul networks,” predicted Tom Saponas, senior vice president and chief technology officer for monitoring equipment vendor Agilent Technologies.

Duncan Potter, vice president for network switching equipment provider Extreme Networks, suggested U.S. carriers look toward their European counterparts for guidance on how to make the transition. “Europe has shown how you can build a low-cost network. They're using Ethernet; it's the key,” Potter said. “What's stopping it in the U.S. is the voice orientation of the carriers.”

Potter conceded that European carriers have an advantage over their U.S. counterparts.

“In Europe, there's less regulation but more government activism,” he said. “A lot more attention is paid [by government] on how to cross the digital divide.”